CASE: ACER, INC.: TAIWAN ‘S RAMPAGING DRAGON
In comparison to Stan Shih, Leonard Liu was a Taiwan-born, US based senior IBM executive “with a reputation for a no-nonsense professional management style”. On the other hand, Stan Shih had a more frugal approach to management and delegated a decision making responsibilities to his employees to harness “the natural entrepreneurial spirit of the Taiwanese. Shih believed in a “hands off” style of management, bias for delegation and an informal manner. His style of management put all the trust of the firm in the hand of the employees hoping the employees will always do the right thing in the interest of the firm. This style of management worked because it created a very close family among the employees and attracted up and coming engineers that didn’t want to work for companies that suppressed their creativity.
Stan Shih management style didn’t believe in the interest of the shareholders as the first priority. Stan Shih management embedded the focus that the customers are first, employees second and shareholders are third. Shih management style challenged employees to “think and learn” at the same time while they are working for the firm. In Shih’s management style management were allowed to nurture the pupils and as long as the mangers took responsibility for their actions, the managers had the freedom to make decisions.
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As I mentioned in the beginning, Leonard Liu had a no-nonsense professional management style. Liu worked for a US based IBM; therefore he had the Americanized conquest and conquers management style. He believed in acquisitions of companies that can help Acer improve their products no matter the state of the company they are acquiring. Take for example, Counterpoint (acquired for $1 million plus a stock swap) and Service Intelligence a $500,000 transaction) Shih suggested the deal be structured as a joint venture to maintain the Altos managers’ stake in the business. However, Liu insisted on an outright acquisition to ensure control and Shih deferred to his new president judgment.
Liu brought IBM management structure, practices and systems. Liu reduced management layers, established standards for intra-company communication and introduced productivity and performance. Liu introduced the RBU (Regional Business Unit) & SBU (Strategic Business Unit) organization. Liu believed in laying off employees based on their performances to satisfy the shareholder. Liu had an iron fisted management style, and no “BS” approach to management compared to Shih. Liu management style made everyone accountable for their actions.
A factor that contributed to Acer’s decline was the change of name from Multitech due to a US company registered under the same name claiming they were infringing their trademark. After ten years of building a corporate reputation and brand identity. Shih had to start all over again. Shih decision to disregard the advice to focus on profitable OEM business ventures rather than pursue the humongous cost of recreating a new global brand lead to a huge loss following the 1988 IPO, Acer’s pockets were too shallow to finance such a venture.
Shih ideal belief that it’s “better to lose control” but make money and that “real control came through ensuring common interest” lead to Acer’s decline, sometime you have to put aside common interest to stay afloat. Shih program that allowed any employee with one year of company service to purchase shares diluted his original 50% stake to about 35%; too much common interest was involved. Acer wasn’t adapting to the change in time and rapid growth in their industry.
Leonard Liu resignation was beneficial for Acer because he made bad management decision. He was acquiring companies that were losing tons of money with the hope that they will rebound. Companies that were going “down the toilet”. The PC markets were changing immediately after he made the acquisition of Altos brand; Acer was losing $20 million. Liu was responsible for the loss generated by ACC, Liu was laying off employees to adjust the bottom line instead of trying to fix the problem he created by bad acquisitions of bleeding companies.
Liu’s “by-the-numbers” management approach was proven incompetent. He was spending too much money on top accounting and law firms and was hiring employees that stayed in first class hotels. Liu lost his credibility as a respected world-class executive was dramatically declining and his management style was being questioned and employees didn’t work at the best of their abilities. Leonard Liu’s was the best thing that happened to Acer.
I think Acer should allow the development of the Aspire to continue because Acer was in ninth place in the US market. The price of the Aspire will be
offered between $1199 for the basic product and $2999 for the highest end system with monitors. It’s a risk Acer will have to make. I think they made a good decision because I see a lot of Acer computers on the market today at great prices with incredible operating systems.
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